Originators should prepare for at least one Fed hike this year

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Originators can expect at least one Fed hike before year’s end, as the economy continues to show improvement – but when will it come?

David Woo, head of global rates and currencies research at Bank of America Merrill Lynch believes the market is optimistic about economic growth and believes there is a 60 percent chance the FED hikes its benchmark rate in September. He also believes there is a 100 percent chance of a “full hike” by December.

And overall, 85 percent of BoA analysts are expecting at least one FED hike this year.

Woo, in speaking to Business News Network in Canada, cited Yellin’s “hawkish” statement as evidence that she plans on raising the rate sooner than later.

“Since my appearance before this Committee in February, the economy has made further progress toward the Federal Reserve's objective of maximum employment, while inflation has continued to run below the level that the Federal Open Market Committee (FOMC) judges to be most consistent over the longer run with the Federal Reserve's statutory mandate to promote maximum employment and price stability,” Yellen told the Committee on Financial Services, U.S. House of Representatives last week.

Further to Woo’s prediction, 82 percent of the 70 economists who took part in a Wall Street Journal survey last week expect a fed rate hike in September.

Meanwhile, not all analysts are as bullish.

St. Louis Fed chief James Bullard told FoxBusiness news that there is more than a 50 percent probability that the benchmark rate will be hiked in at the September 16-17 meeting.

Following last month’s meeting, only two of the 17 fed officials wanted to hold off on raising the rate until 2016.